P&H High Court Grants Bail In ₹700 Crore GST Scam | Flags Abrupt Arrests Under CGST Act And Concerning Deviation From Procedure
Isabella Mariam
The High Court of Punjab and Haryana Single Bench of Justice Harpreet Singh Brar granted regular bail to two individuals accused under Sections 132(1)(b) and 132(1)(c) of the Central Goods and Services Tax Act, 2017. The Court directed their release on bail after observing that the petitioners had remained in custody for over nine months with no substantial progress in trial. Noting that the investigation stood completed in relation to the petitioners and the prosecution evidence was predominantly documentary in nature, the Court concluded that continued detention served no further purpose. The Court also mandated the imposition of specific conditions to secure the petitioners' presence during trial proceedings and preserve the integrity of the evidence.
The present case concerns petitions filed under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 seeking regular bail in relation to Complaint No. DGGI/INT/INTL/939/2024-GrE-O/O ADG-DGGI-ZU-LUDHIANA. The complaint had been registered under Section 132(1)(b) and 132(1)(c) of the CGST Act, 2017. The petitioners, Amit Kumar Goyal and Manish Kumar, had been arrested following allegations of large-scale financial misconduct.
According to the prosecution, a Suspicious Transaction Report (STR) from the Financial Investigation Unit revealed cash withdrawals amounting to Rs. 4,938.63 crore from branches of IFSC Bank located in Ambala Cantt and Panchkula. It was further stated that petitioner Amit Kumar Goyal had withdrawn Rs. 262.4 crore from eight bank accounts while petitioner Manish Kumar had withdrawn Rs. 455.02 crore from eleven accounts.
The prosecution alleged that the petitioners had created twenty-seven fake firms. Two of these firms were in the name of Amit Kumar Goyal, and the remaining twenty-five were established using IDs of other individuals. These were, however, allegedly linked to Amit Kumar Goyal through common mobile numbers and emails. A search was conducted on October 8, 2024, under Section 67(2) of the CGST Act at four locations in Mandi Gobindgarh and Zirakpur. This led to the recovery of documents related to fake GST billing and multiple electronic devices.
It was alleged that the petitioners issued fabricated GST invoices worth Rs. 700 crore and availed input tax credit of approximately Rs. 107 crore based on these invoices. In support of these allegations, the prosecution claimed recovery of 54 cheque books, 46 ATM cards, 11 PAN cards, 5 Voter IDs, 7 rubber stamps, and numerous mobile phones, hard disks, and laptops.
The prosecution further submitted that Amit Kumar Goyal, in his voluntary statement, admitted that the goods in question were never physically received by the firms and that bills were issued solely to avail tax credits. It was also stated that petitioner Manish Kumar worked with him and received 30-40% commission.
The petitioners, however, challenged these allegations. Manish Kumar's counsel submitted that the petitioner was coerced into making incriminating statements. It was argued that the GST registration of most firms had been cancelled without furnishing physical verification reports. The electronic devices were allegedly forensically examined without the petitioners' consent.
Additionally, the petitioners argued that the issuance of show cause notices under Sections 73 and 74 of the CGST Act was delayed, occurring only after the bail petitions were filed. They relied on CBIC Circular No. 171/03/2022-GST dated July 6, 2022, which states that no tax liability arises if the accused only issued invoices. Another circular dated January 13, 2025 (No. 01/2025-GST) mandates that the grounds of arrest must be explained, which the petitioners alleged was not done.
The petitioners further contended that arrest authorization under Section 69 of the CGST Act was granted mechanically and without due application of mind. It was stated that the petitioners had been in custody since October 9, 2024, while pre-charge evidence had not progressed for over six months.
In response, the prosecution cited the seriousness of the offence and referred to pending investigation against another co-accused. It was argued that granting bail could risk evidence tampering or witness influence. The prosecution referred to several judgments including Sandeep Goyal vs. Union of India and State of Gujarat vs. Choodamani Parmeshwaran to support its contention.
"Having heard learned counsel for the parties and after perusing the record, this Court finds force in the arguments out forth by the petitioner. However, in order to test the veracity of the same, the relevant data requires to be solicited to conduct a logic-based, empirical analysis."
The Court directed eight officers including Chief Commissioners and ADGs of GST Intelligence across Punjab, Haryana, and Chandigarh to provide data regarding the number of complaints, trials, convictions, and issuance of notices under Sections 73/74.
On analysing the affidavits, the Court recorded: "Since its commencement, only a solitary conviction has been made in the States of Punjab, Haryana and Union Territory of Chandigarh put together." It further noted: "Where notice is served, arrests are not being made however, where arrests are in fact made, no prior notice is served."
The Court remarked on the trend of prioritizing arrests over trial: "Securing a conviction and concluding the trial is not a matter of priority for the respondent as all its energy is devoted towards curtailing liberty of the prospective accused."
"The CGST Act is clear in its mandate and does not leave scope for ambiguity for the respondent to justify the conduct of its officials."
"The prolonged legal battle not only infringes upon the right to speedy trial as enshrined under Article 21 of the Constitution of India but also causes irreparable harm to the psychological well-being as well as the reputation of the accused."
Quoting Prahlad Singh Bhati vs. NCT, Delhi, the Court reaffirmed: "The jurisdiction to grant bail has to be exercised on the basis of well settled principles having regard to the circumstances of each case and not in an arbitrary manner."
Rejecting the contention that bail should be denied due to pending investigation against a co-accused, the Court stated: "This Court finds it against objective standards of reason and justice to deny bail to those accused against whom final report has been presented merely on the ground that the investigation is under progress qua a co-accused."
Quoting Vineet Jain vs. Union of India, the Court recalled: "These are the cases where in normal course, before the Trial Courts, the accused should get bail unless there are some extra ordinary circumstances."
Referring to Sanjay Chandra vs. CBI, the Court recorded: "When the undertrial prisoners are detained in jail custody to an indefinite period, Article 21 of the Constitution is violated."
The Court also relied on Ashutosh Garg vs. Union of India, where the Hon’ble Supreme Court granted bail despite the alleged defrauded amount being Rs. 1032 crore.
The Court allowed both petitions and ordered that the petitioners be released on regular bail upon furnishing bail and surety bonds to the satisfaction of the concerned court. The Court stated: "The petitioners namely-Amit Kumar Goyal and Manish Kumar are hereby released on regular bail... However, the bail shall also be subject to the following conditions:"
The Court directed that the petitioners must deposit their passports with the trial court. They must cooperate in the trial without seeking unnecessary adjournments. They are barred from tampering with prosecution evidence or intimidating witnesses. Additionally, they are prohibited from disposing of any property owned by them or by firms under investigation in which they hold a substantial interest.
The Court further clarified: "If the petitioners hamper the investigation qua the co-accused in any manner, the respondent will be at liberty to approach the concerned trial Court and if sufficient reasons are found, the trial Court will be well within its rights to cancel their bail."
The Court concluded by stating that nothing in the order should be construed as an opinion on the merits of the case.
Advocates Representing the Parties:
For the Petitioners: Mr. Vinod Ghai, Senior Advocate with Ms. Kashish Sahnia, Advocate and Mr. Arnav Ghai, Advocate (CRM-M-8675-2025); Ms. Muskaan Gupta, Advocate and Ms. Muskan Chauhan, Advocate (CRM-M-14956-2025)
For the Respondents: Ms. Sharmila Sharma, Senior Panel Counsel, DGGI (CRM-M-14956-2025); Mr. Sunish Bindlish, Senior Standing Counsel, DGGI; Ms. Pridhi Sandhu, Senior Standing Counsel, CGST, Chief Commissioner, Panchkula; Mr. Manish Bansal, Public Prosecutor, U.T. Chandigarh; Mr. Alankrit Bharadwaj, Additional P.P., U.T. Excise and Tax Department
Case Title: Manish Kumar & Amit Kumar Goyal vs. Directorate General, Goods & Services Tax Intelligence, Ludhiana Zonal Unit
Neutral Citation: 2025: PHC:097148
Case Numbers: CRM-M-8675-2025(O&M) and CRM-M-14956-2025(O&M)
Bench: Justice Harpreet Singh Brar
